INTERNATIONAL
MANAGEMENT
GLOBAL
Business and People
Management
Professor H. Michael Boyd, Ph.D.
Professor H. Michael Boyd, Ph.D.
International Management
International
Ninth Edition
Management
Luthans | Doh
Fred Luthans
Jonathan P. Doh
Ninth Edition
Chapter 3
Ethics, Social Responsibility,
and Sustainability
International Management
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Ethics, Social Responsibility,
and Sustainability
• The specific objectives of this chapter are to
1. EXAMINE ethics in international management and
some of the major ethical issues and problems
confronting MNCs.
2. DISCUSS some of the pressures on and action being
taken by selected industrialized countries and
companies to be more socially and environmentally
responsive to world problems.
3. EXPLAIN some of the initiatives to bring greater
accountability to corporate conduct and limit the
impacts of corruption around the world.
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Ethics, Social Responsibility, and
Sustainability in International Management
• Ethics
– Study of morality and standards of conduct.
• Dilemmas arising from conflicts between
ethical standards of a country and business
ethics are most evident in employment and
business practices, recognition of human
rights, including women in the workplace, and
corruption
– Inferring right vs. wrong in legal sense
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Ethics, and Social Responsibility, and
Sustainability in International Management
• Corporate Social Responsibility (CSR)
– Involves the actions of a firm to benefit society
beyond requirements of the law and the direct
interests of the firm
– Closely related to ethics
– CSR concerns include working conditions in
factories and service centers as well as
environmental impacts of corporate activities
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Ethics Theories and Philosophy
• Kantian philosophical traditions
– Individuals (and organizations) have responsibilities based on a
core set of moral principles that go beyond those of narrow selfinterest.
• Aristotelian virtue ethics
– Focus on core, individual behaviors and actions and how they
express and form individual character.
• Utilitarianism
– Favors the greatest good for the greatest number of people
under a given set of constraints.
• Eastern philosophy
– Views the individual as part of, rather than separate from,
nature.
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Human Rights
• Human rights issues challenge MNCs
– Currently no universally adopted standards of what
constitutes acceptable behavior
– A great deal of subjectivity and culturally biased
viewpoints exist
– Some basic rights: life, freedom from slavery or
torture, freedom of opinion and expression,
general ambiance of nondiscriminatory practices
– Human rights violations still rampant globally
• China (Tiananmen Square) and Russia
• Women’s rights
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Ethics, Social Responsibility, and Sustainability
Around the World: JAPAN
• Equal opportunity issues
– Gender-gap hiring: refusal to hire women for more
than low-level jobs
– Glass ceiling: lack of promotion to management
positions
– Sexual harassment: hostile work environment
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Ethics, Social Responsibility, and Sustainability
Around the World: EUROPE
• Equal employment opportunity
– Glass ceiling pervasive throughout the world
– France, Germany, and Great Britain have seen
an increase in the number of women in
management, but the increases tend to be only
at lower levels
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Labor, Employment,
and Business Practices
• Employment and business practices
– Difficult to establish a universal foundation of
employment practices
– Difficult dilemmas in deciding working conditions,
expected consecutive work hours, and labor
regulations
– Frequent offshoring due to differences in labor
costs
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Ethics, Social Responsibility, and Sustainability
Around the World: CHINA
• Workers not well paid
– Often forced to work 12 hours a day, 7 days a
week
– 2010: Foxconn factory worker suicides
– 2012: Over 43% of Foxconn workers had seen or
been part of a workplace accident.
• Human rights violations
– Use of child labor
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Environmental Protection
and Development
• Countries approach the issue of conservation
of natural resources differently
– Poor countries are more focused on improving the
welfare of their citizens rather than improving the
environment
– Environmental Kuznets Curve
• Many companies violate laws and jeopardize
the environment
– 2010 BP Gulf of Mexico oil rig explosion
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The Environmental Kuznets Curve
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Globalization and Ethical Obligations
of MNCs
• Should the MNC adopt the regulations in the
country of origin or those in the country of
operation?
• “Doing the right thing” is not always easy
– Levi Strauss in Bangladesh
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Reconciling Ethical Differences
across Cultures
• Integrative Social Contracts Theory
– Helps companies avoid relativism versus absolutism
– Gives managers a framework to use when they face a
gap between the moral and ethical values in the home
country and in the host country
• Corporate Social Responsibility
• Sustainability
– Development that meets humanity’s needs without
harming future generations
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Corporate Social Responsibility
and Sustainability
• Nongovernmental organization (NGO)
– Private, not-for-profit organization that seeks to serve
society’s interests by focusing on social, political, and
economic issues such as poverty, social justice, education,
health, and the environment.
• NGOs have grown in number, power, and influence
– NGOs have urged MNCs to be more responsive to a range
of social needs in developing countries
• NGO activism has caused major changes in corporate
behavior
– NGOs have been active in promoting fair trade products
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Corporate Social Responsibility
and Sustainability
• Examples of NGOs in the U.S. and globally
– Save the Children
– Oxfam
– CARE
– Amnesty International
– World Wildlife Fund
– Conservation International
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Corporate Response to Social
and Organizational Obligations
• Agreements and codes of conduct committing
MNCs to maintain certain standards
– U.N. Global Compact
• Codes help offset real or perceived concern that
companies move jobs to avoid higher labor or
environmental standards in their home markets
– Contribute to raising of standards in developing world
by “exporting” higher standard to local firms in these
countries
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Principles of the Global Compact
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•
•
•
Human Rights
Labor
Environment
Anticorruption
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Principles of the Global Compact
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Corporate Governance
• Corporate governance
– The system by which business corporations are
directed and controlled.
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•
•
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Distribution of rights and responsibilities
Stakeholder management
Spells out rules and procedures
Makes decisions
• Becoming more important after numerous
scandals
– Arthur Anderson, Enron, Lehman Brothers
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Corporate Governance
• Many continental European countries are “insider”
systems
– Ownership more concentrated
– Shares owned by holding companies, families, or
banks
• Rules and regulations differ among countries and
regions
– U.K. and U.S. systems are “outsider” systems
• Dispersed ownership of equity
• Large number of outside investors
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Corruption
• Corruption
– Government corruption is a pervasive element in
international business environment
• Scandals in Russia, China, Brazil, Pakistan, Lesotho,
South Africa, Costa Rica, Egypt, and elsewhere
• Some evidence that discontinuing bribes does
not reduce sales of the firm’s products or
services in that country
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Transparency International Corruption
Perceptions Index Ratings
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Global Initiatives to Increase
Accountability and Limit Corruption
• Foreign Corrupt Practices Act
– Makes it illegal for U.S. companies and their managers
to attempt to influence foreign officials through
personal payments or political contributions
• “Entertainment” expenses
• “Consulting” fees
• Organization of American States Inter-American
Convention Against Corruption, Foreign Corrupt
Practices Act, Transparent Agents Against
Contracting Entities
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Corruption and Foreign Corrupt
Practices Act
• Recent formal agreement by many
industrialized nations to outlaw the practice of
bribing foreign government officials
– Organization for Economic Cooperation and
Development
– 29 member nations; now 34
– Fails to outlaw most payments to political party
leaders
– Does indicate growing support for anti-bribery
initiatives
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International Assistance
• Governments and corporations are
collaborating to provide assistance to
communities and locales through global
partnerships
• Best “investments”
– Controlling and preventing AIDS
– Fighting malnutrition
– Reducing subsidies and trade restrictions
– Controlling malaria
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Copenhagen Consensus
Development Priorities
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The U.N. Millennium
Development Goals
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Review and Discuss
1. How might different ethical philosophies influence how
managers make decisions when it comes to offshoring of
jobs?
2. What lessons can U.S. multinationals learn from the
political and bribery scandals in recent years, such as
those affecting contractors doing business in Iraq
(Halliburton) as well as large MNCs such as Siemens, HP,
and others? Discuss two.
3. In recent years, rules have tightened such that those who
work for the U.S. government in trade negotiations are
now restricted from working for lobbyists for foreign firms.
Is this a good idea? Why or why not?
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Review and Discuss
4. What are some strategies for overcoming the
impact of counterfeiting? Which strategies work
best for discretionary (for instance, movies)
versus nondiscretionary (pharmaceutical) goods?
5. Why are MNCs getting involved in corporate
social responsibility? Are they displaying a sense
of social responsibility, or is this merely a matter
of good business? Defend your answer.